Public Utilities
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Public Utilities

Management Challenges for the 21st Century

David E. McNabb

An introduction to the current issues and challenges facing managers and administrators in the investor and publicly owned utility industry, this engaging volume addresses management concerns in three sectors of the utility industry: electric power, natural gas, and water and wastewater systems. Beginning with a brief overview of the historical development of the industry, the author looks at policy issues and discusses management ethics. He then examines a number of the major challenges in these organizational functions: management and leadership, planning, marketing, accounting and finance, information technology, governance, and human resources. In the final section of the volume he looks at issues specific to each of the three industry sectors.
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Chapter 8: The Public Utility Marketing Challenge

David E. McNabb


For most of the history of the public utility industry, marketing was an uncomplicated, straightforward process. Most integrated utility providers were interested in increasing overall demand for their product. Generating facilities were large in order to benefit from economies of scale, often resulting in an oversupply of product. Rates were controlled by legislative agencies; price competition did not exist. Most customers were charged a flat rate for the product or service, regardless of the amount used. Marketing consisted of encouraging existing customers to use more of the product, or of expanding by moving into new market territories. State laws required utilities to serve all customers; growth from normal population and economic growth taking place in the existing service area was generally slow enough for utilities to meet and exceed all requirements for service. The utility business was considered to be a slow, steady, safe, and undramatic business. Assuming that you knew what you were doing and did it reasonably well, profits were ‘guaranteed’ by law in the form of stateapproved ‘fair’ rates of return on investments. In the few spots where integrated utilities still exist, this level of marketing still functions. It is, however, rapidly dying out, and utility marketing now includes activities related to risk management. Beginning in the 1970s, the nature of the utility industry’s marketing environment changed. A series of petroleum-based energy shocks spread throughout the industry. Government reacted by passing laws to conserve and search for more and new sources of energy. The term...

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